Publications
Publications
- 2022
Passive Ownership and Price Informativeness
By: Marco Sammon
Abstract
I propose three new empirical measures of price informativeness motivated by a theoretical model. I find average price informativeness declined over the past 30 years and passive ownership is negatively correlated with price informativeness. To establish causality, I show that price informativeness decreases after quasi-exogenous increases in passive ownership arising from index additions and rebalancing. The model offers two explanations for the empirical results: passive ownership decreases investors’ incentives to become informed and leads investors to re-allocate their attention from stock-specific risks to systematic risk.
Keywords
Citation
Sammon, Marco. "Passive Ownership and Price Informativeness." Working Paper, September 2022.